Face to Face with John Poon BBS JP, Chairman of the Financial Reporting Council

John Poon BBS JP, Chairman of the Financial Reporting Council, discusses his multifaceted career, offering insights and advice on how to thrive as a lawyer across different industries and jurisdictions, and then delves into his current undertakings, including overhauling the oversight arrangements of the auditing profession for publicly listed entities in Hong Kong.

“Nothing ventured, nothing gained,” has been Dr. Poon’s credo throughout his career, which cuts across a variety of industries and jurisdictions. From his start as a social worker to a labour relations practitioner to his decision to practice law in Canada to his transition into corporate finance and then into the public sector in Hong Kong, he has taken risks and embraced change. Both of which, he explains, have been crucial to his success and professional satisfaction.

During transitional periods, Dr. Poon has let his passion be his guide, leveraging his legal training and acquiring new skills to take on any role that interests him. “I hope the next generation of lawyers will be equally enthusiastic in taking on new challenges in this ever changing global and local environment and dare to step outside of their comfort zone.” Legal skills are “portable skills”; and there’s no reason to adhere to convention for convention’s sake. Success follows passion, dedication and hard work, irrespective of the industry or discipline, he explained.

His versatility has also enabled him to steward many organisations and government bodies through a variety of structural changes and reform initiatives; currently his efforts have been focused on reforms advocated by the Financial Reporting Council (“FRC”) and the Mandatory Provident Fund Schemes Authority (“MPFA”).

Hong Kong Calling

Dr. Poon started his legal career in Edmonton, a city of approximately 1 million, at a firm where he developed a general corporate practice. While he found working with private companies and local corporate commercial matters to be interesting, by 1987 he longed for more challenging and dynamic work in the international sphere.

Intermittent trips to Hong Kong, where he was born and raised, prompted him to consider returning to his roots. Every time he returned, he would immediately feel connected to the city’s energy, its kaleidoscope of life and culture, fusing east and west. He explained that the international metropolis seemed to be the perfect place to apply what he had learned in Edmonton in a more commercial and global context. While uprooting his life in Alberta and returning to Hong Kong was not an easy decision, or transition, as he had been away from Hong Kong for 18 years, he felt it was an opportunity worth pursuing vigorously.

With Canada, the UK and Hong Kong all being Commonwealths, he gained admission as a solicitor in England & Wales in 1988 and in Hong Kong the following year.

Navigating Unchartered Territories

In 1990, Dr. Poon joined Century City Group, a group of Hong Kong companies whose core businesses encompass investment holding, property development and investment, hotel ownership and management. He started as Group General Counsel and within one year was promoted to be the Corporate Director of the Group.

While the work was engaging, he was immediately plunged into areas outside of his expertise. The learning curve was “quite steep”, he said, as his experience in Canada did not directly translate. He lacked substantial local knowledge of the real estate and hotel industries and had no prior experience dealing with the Hong Kong Listing Rules. Upon his executive promotion, he was thrust to the helm to assist in corporate finance and mergers and acquisitions; therefore dealing with investment bankers and finance professionals became routine.

“I had to find workable legal and commercial solutions to major issues the Group faced. Being a risk-averse lawyer, it was difficult, at first, to deal with commercial issues that were ‘uncertain’ or ‘could not be specifically dealt with in the agreements’,” he said. What he learned during this time is that it is not only essential to be open minded in the face of uncertainty, but also to ask questions and be humble about what you do and do not know. “Half of the battle is asking questions; and if you can ask the right questions, someone will eventually give you the right answers. But, then again, getting the right answer is not the end of the story. There is often more than one right answer; the art lies in taking those answers and adopting the one that is commercially workable for all interested parties.”

In spite of the challenges, Dr. Poon believes he was able to succeed because he pursued work that he was passionate about and fully committed himself to learning on the job, particularly the ins and outs of the new industries.

The Sky is the Limit

In 1999, Dr. Poon joined Esprit Holdings Limited as an Executive Director and the Group Chief Financial Officer and by 2004 was appointed Deputy Chairman of the Board of Directors. While he enjoyed his work at Century City Group, the opportunity to work at a company whose brand and culture were international seemed too good to pass up. This role also offered him the opportunity to influence the strategic direction of the company; in this role, he was regarded as the resident corporate finance expert.

During his nine year tenure, Esprit’s profit after tax rose over 11-fold, while the multinational apparel company’s market capitalisation expanded from approximately US$1 billion to a high in excess of US$20 billion. Esprit was also repeatedly recognised as one of the best-managed companies and best performing stocks on Hong Kong’s Hang Seng Index.

Dr. Poon believes the company’s success during this period started with its reunification of the brand. The global brand was, at the time he joined, owned by Esprit Holdings except for the US piece which was separately owned by two investment funds. “So my first strategic initiative was to acquire the missing piece of the global brand. An earnings accretive deal was completed in 2002 which allowed us to pursue a ‘sky is the limit’ growth story thereafter.”

The next strategic move he pursued was elevating Esprit’s successful product brand into an international corporate brand. To achieve this, the company had to enlarge its shareholder base; particularly with institutional investors across the world. Dr. Poon spearheaded investor relations initiatives, launching two around-the-world road shows per year. “It is essential to explain what you’re trying to achieve in a simple and succinct way. It’s not as easy as just showing up; you have to talk about brand strategy and execution plans in a way that resonates with target investors.” Esprit was admitted as a constituent stock of HSI by the end of 2002.

Dr. Poon said that his training in law and advocacy helped him to craft and communicate a credible growth story. He was also able to gain investor confidence by being transparent about the company’s results and challenges. He made it a general practice of only placing shares in major blocks soon after the company made public announcements about their current state of affairs – about their financials, their strategic direction and some of the risks and challenges that they were currently facing. “I wanted to be able to look the investors in the eye and say, your information base and ours are relatively the same. I wanted to ensure them that we were not trying to take advantage of any sort of insider information.”

He explained that all of this was aligned with his firm beliefs about sound corporate governance. “It’s not about meeting minimum standards that are prescribed by the law or the listing rules. It’s about having integrity. It’s about being transparent. It’s about treating stakeholders, including minority shareholders, fairly.” While there were many factors that contributed to the company’s price/earnings multiple expansion during his time at Esprit, Dr. Poon believes that their corporate governance practice (ie, “Substance Over Form”) was one of the most influential.

Public Appointments

While strategically leading Esprit through structural changes, Dr. Poon was appointed in 2003 to be a member of the Standing Committee on Company Law Reform. “This was the first time I held public office,” he said. “What I learned from being a member on this committee is that reform takes time as it affects public interest. It’s evolutionary, not revolutionary.”

In 2004, he was appointed to the Board of Review (Inland Revenue Ordinance) and in 2005, to the Council of the Hong Kong Institute of Certified Public Accountants (“HKICPA”), where he chaired various committees including the Professional Qualifications Accountability Board and the Governance Review Task Force. “It was through these appointments that I gained most of my knowledge about the accounting and auditing profession in Hong Kong,” he said. “While my work with the HKICPA was as a lay member, I used my knowledge and experience to assist them with the current challenges and issues that they were facing.”

Less Is More

In 2011, Dr. Poon accepted appointment as a Non-Executive Director of the MPFA. He recalls being told upon his appointment that the policies and direction of the MPFA would affect 2.5 million workers in Hong Kong and roughly 250,000 employers.

As such, Dr. Poon took the widespread concern amongst members over the high fees and low returns seriously. He suggested a study be conducted on the cost associated with running MPF schemes. With the findings of the MPF cost study in 2012 and the outcome of a subsequent public consultation, there was general consensus that a new investment product with a capped fee could be offered to the public. “Logically, if you reduce your fees and expenses in the funds, you will automatically enhance your returns,” he said.

In addition to looking at how to reduce members’ fees, Dr. Poon and his colleagues also examined the investment landscape upon learning many workers found it difficult to make a decision about where to put their hard earned money, as there were over 400 MPF funds on the market. “So the workers’ difficulty in making a choice came as no surprise. To address these concerns, I advocated a simplified investment option be introduced that would meet the overall objective of retirement savings for the average worker,” he added.

In late May, the Legislative Council passed the Mandatory Provident Fund Schemes (Amendment) Bill 2015, which incorporates the reforms Dr.Poon advocated for by providing for the introduction of a Default Investment Strategy (“DIS”) that each MPF scheme must provide to all members. The DIS imposes a management fee cap of 0.75percent of the net asset value of its constituent funds. There is a separate cap on recurrent expenses of not exceeding 0.2 percent. The DIS will also adopt global diversified and de-risking investment principles, requiring trustees to gradually reduce a scheme member’s exposure to relatively higher risk investments as the member approaches retirement age (ie, 65).

This is a major milestone in the progressive development of the MPF System since its launch in 2000. Dr.Poon hopes the DIS constituent funds will provide a good investment alternative for workers to place their MPF contributions.

FRC & Auditor Regulatory Reform

In 2011, Dr. Poon also accepted appointment as a member of the FRC, an organisation formed in 2006 under the Financial Reporting Council Ordinance following the Enron and Worldcom saga in the US. In 2012, Dr. Poon was appointed Chairman. The FRC’s remit is currently limited to investigating irregularities committed by listed entity auditors in Hong Kong and it does not undertake inspections and disciplinary functions. Dr. Poon has advocated for reform initiatives to enhance the auditor regulatory regime in Hong Kong with an aim to improve audit quality and the quality of financial reporting.

In 2013, the FRC published a detailed comparative study of international best practice in auditor regulation. It reveals that audit regulators of major jurisdictions, including the US, UK, Canada, Australia and Singapore, are independent of the profession with authority over auditors of listed entities as a minimum. All relevant regulators covered in the report, amongst a total of 40 jurisdictions around the world including China, currently meet the regulatory or equivalence requirements of the European Commission (“EC”) and/or are members of International Forum of Independent Audit Regulators (“IFIAR”).

With reference to the FRC’s study, the Government launched a consultation paper on the auditor regulatory reform in 2014. Dr. Poon explained that it was “broadly concluded” that any future auditor regulatory regime should be independent of the profession, and that it should be benchmarked against international standards and practices.

In 2015, the Government, taking into account the FRC’s submission from a public interest perspective, proposed to vest the FRC with powers to carry out direct inspections and investigations of auditors of listed entities, as well as to take disciplinary action against them as required. The FRC would also be vested with oversight powers in relation to registration, the setting of standards in professional ethics, auditing and assurance, and continuing professional development for auditors of listed entities. These are the requirements for Hong Kong, being an international financial centre, to be recognised by IFIAR and the EC.

Under Dr. Poon’s leadership, the FRC has been unwavering in its commitment to taking the reform process forward. The FRC is updating its 2013 comparative study to facilitate discussions by all stakeholders particularly as the legislative process evolves, and the report will be made available later in 2016.

“I very much look forward to bringing the reform to its successful fruition which is in the best interest of the investing public. A key aim is to transform the FRC from an ‘investigator’ into a fully-fledged ‘independent auditor regulator’, so as to enable Hong Kong to be eligible for membership of IFIAR and be recognised as having regulatory equivalence with the EC.”

Apart from the auditor regulatory reform, the FRC has had positive discussions with Mainland authorities to overcome difficulties experienced by regulators in gaining access to audit working papers under current Mainland regulations. “The discussions have been very promising and we expect to agree this year on a suitable mechanism to enable FRC to discharge its statutory functions,” said Dr. Poon.

His Oath

Despite being a self-proclaimed “unconventional lawyer”, Dr. Poon emphasised that throughout his career his core values have remained tethered to those that undergird the legal profession: integrity, diligence, transparency and fairness. “I can still vividly recall when I was admitted some 30 years ago as a barrister and solicitor before the Court of Appeal in Alberta, Canada. After I had taken the oath, the presiding Justice reminded me to review it on an annual basis and reflect on my obligations to the court, to the legal profession and to society, in general. I have adhered to his advice, and it has done me a lot of good over the years.” 


John Poon BBS JP
Chairman of the Financial Reporting Council

Dr. Poon is the Chairman of the Financial Reporting Council and a Non-executive Director of the Mandatory Provident Fund Schemes Authority. He is also an Adjunct Professor of the School of Business, University of Alberta, Canada.  He is the former Deputy Chairman & Group Chief Financial Officer of Esprit Holdings Limited and the former Executive Director & Group General Counsel of Century City International Holdings Limited. He has received a number of accolades, including the “Best Chief Financial Officer in Retail Sector 2005” and “Directors of the Year Awards 2002 (Listed Company Executive Directors)”.

Dr. Poon received his Bachelor of Arts Degree in Economics, a Bachelor of Laws Degree and an Honorary Doctor of Laws Degree from the University of Alberta, Canada. He is a Solicitor of Hong Kong.


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Editor, Hong Kong Lawyer
Legal Media Group
Thomson Reuters
cynthia.claytor@thomsonreuters.com